Expanding Japan’s construction industry

According to Timetric’s Construction Intelligence Center (CIC) Japan’s construction industry reduced by 1.6% in 2014. Yet the Japanese construction industry is anticipated to increase over 2015 – 2019. Overall it is expected to reach a potential CAGR of 1.2%, increasing from US$600.2 billion in 2014 to US$637.4 billion in 2019.

Factors supporting this growth include investments in residential and infrastructure markets, low unemployment rates, improvements in consumer and investor confidence, positive developments in regional economic conditions and investment in public transport infrastructure such as the construction of the JPY5.5 trillion (US$57.3 billion) ultra-high speed magnetic levitation (maglev) trainline and the JPY10.0 billion (US$97.6 million) Kansai international airport expansion project.

Additionally the country’s urban population is projected to increase to 94.1% by 2020 – rising from 115.3 million in 2010 to 119.4 million in 2020 – according to the United Nation’s Department of Economic and Social Affairs (UNDESA).

Sina Zavertha, Economist at Timetric, commented: “The country’s growing urbanisation will create fresh demand for the residential construction market over the forecast period. Consequently, we can expect market output to record a CAGR of 2.25%, in nominal terms over the forecast period, to value JPY20.7 trillion (US$223.3 billion) in 2019.”

Yet there are risks to this outlook on construction industry growth in Japan associated with rising labour and construction materials costs.